It’s 2010. Beth is ready to buy her starter home. She knows closing on her mortgage is going to be a long process. She is frustrated by the number of hoops she must jump through and the amount of tedious paperwork she must complete and sign.
There’s nothing she can do but wait for the mortgage process to play itself out. It’s now 2022. Beth is ready to upgrade from her starter home to her ‘forever’ home. The entire home-purchase process is now shorter, thanks to her lender’s digitized application and closing processes. Beth is pleasantly surprised by how mortgage processing for lenders has evolved in just under a decade.
Today, the mortgage industry is on the cusp of digital re-imagination, driven partly by the need to meet the growing demand from tech-savvy borrowers for a quick and seamless process, and partly by the pressure to reduce costs and improve efficiencies.
In an increasingly competitive environment, lenders are turning more and more to digitalization and mortgage process automation solutions to create a customer-centric ecosystem and boost competitiveness and profitability – now, as well as in the future.
Moving towards digital mortgage solutions for sustained success
While lenders are looking to eventually digitize their end-to-end mortgage process, thus far, most have focused on the front end of the lending process such as enabling digital loan application and consumer portals – for both purchasing and refinancing options.
As competition intensifies and profit margins remain tight, they are moving to the next stage of digital transformation by pivoting to next-gen technology and mortgage process automation solutions that enhance efficiencies in loan production and improve the servicing experience. Here are the three major areas they are investing in to accelerate cycle times and improve customer satisfaction and retention.
Workflow automation leveraging emerging technologies: Forward thinking lenders are finding ways to create a cognitive computing environment (or Intelligent Automation) by judiciously combining next-gen technologies such as Artificial Intelligence (AI), Machine Learning (ML), Natural Language Processing (NLP) and Robotic Process Automation (RPA) in mortgage processing.
On the one hand, they are tapping into AI/ML applications to identify anomalies, evaluate risk, predict loan performance, and automate customer service with search tools and chatbots. 53% of lenders in a Fannie Mae survey say they expect to adopt some AI solutions by 2020. On the other, they are applying mortgage process automation solutions to routine, rules-based tasks to minimize human intervention, enhance efficiencies, and improve compliance.
They are also combining cognitive applications (that use pattern recognition and computer vision to classify and categorize documents) with OCR solutions (that fast-track data extraction by converting unstructured and semi-structured data into structured data) to further streamline mortgage processing and enhance efficiencies.
Automated Information Services: Intelligent solutions that leverage APIs to automate verification and validation processes such as title decisioning, property valuation, borrower income, assets and employment have gained popularity with mortgage lenders. Handling the verification processes electronically helps enhance efficiencies and customer service, accelerate time-to-revenue, and streamline regulatory compliance.
For instance, electronic verification solutions designed to enable First Day Certainty automate pre-verification processes to slash the average cycle time for validating income, assets, and employment.
Similarly, instant title solutions adopt an analytics-driven approach to quickly identify properties without title defects, considered ‘clear to close’, enabling lenders to instantly kickstart the underwriting process and reduce time to close.
Digitalization initiatives to enhance borrower experience: Modern consumers demand an Amazon-like experience across industries and lending is no different. Nearly half of all borrowers still feel that it takes too long for mortgage processing.
Present-day borrowers want convenient self-serve options to expedite the lending process while retaining the ability to engage lenders on a channel of their choice such as email, chat and telephone – when the need arises. That’s not all. They expect customized service based on their previous interactions with the mortgage lender. Lenders are doubling down to meet these evolving expectations in a variety of ways.
These include using customer intelligence analytics to understand borrower sentiment and emotions and resolve issues quickly; deploying omnichannel capabilities and digital loan and servicing apps to meet borrowers wherever they may be; and creating digital, online experiences across various aspects of the lending process such as mobile applications, consumer portals and eClosings.
Are you ready for the digital future of mortgage?
Fast-forward to 2030. Beth is in the process of refinancing her ‘forever’ home. She’s amazed by the dramatic improvements in cycle times and service levels as compared to her 2022 experience. Her lender uses new digital mortgage solutions that enable her to have contextual conversations in real time.
Internet of Things (IOT) enables lenders to pop up in moments of need with connected homes; Beth receives pre-approved offers on refinancing with proactive interaction leveraging smart speakers and virtual assistants.
The lender also leverages AI and automation across front-end digital mortgage process and the majority of behind-the-scenes underwriting decisions to ensure that Beth meets certain credit requirements, saving her significant time and effort.
Instead of multiple parties keeping separate records in disparate systems, blockchain technology provides a single source of verified data such as information on her taxes, title, income, assets, property valuations and so on, enhancing accuracy and fast-tracking the loan fulfillment process. The result: Beth e-closes on her Refinance in several days, or perhaps even hours, thanks to an integrated digital ecosystem.
As digitally savvy millennials and Gen Z borrowers coming into the market demand faster closings and hyper-personalization, lenders looking to future-proof success have only one option – shift from a tactical to a strategic mindset and reengineer processes to adopt Intelligent Automation across the mortgage lifecycle.
Download the HFS Point of View: From outsourcing to innovation: partnering to revolutionize mortgage servicing which analyzes how outsourcing can be a gateway to innovation and adoption of emerging technologies in the mortgage servicing business.